TPG Eyes $1billion Green Financing NBFC
Private equity group TPG is planning to set up a first-of-its-kind green financing platform in India and may invest $1 billion as the initial equity pool in the non-banking finance company, or NBFC, said people with knowledge of the matter.
A strong effort is being made to fill a gap in developing economies such as India, which is struggling to find cash to migrate legacy energy systems from fossil fuels to greener options. TPG is said to be holding discussions with at least two private lenders and financial institutions to come on board, said people in the know.
That still puts TPG in control, as banks can own no more than 20% of an NBFC, said the people quoted above. In addition to the $1-billion infusion, it plans to raise at least two to three times of debt to build a $2-3 billion platform.
It is said that Kotak Mahindra Bank and ICICI Bank are among the entities tapped so far. This cannot be verified independently. This will be a board-run, professionally managed set up.
The platform will be under the aegis of TPG Rise Climate and plans are expected to crystallise further in the coming months, with an aim to seek approval from the banking regulator by the end of this calendar year. TPG Rise Climate is part of the TPG’s global impact investing platform.
TPG has been working with consulting firm McKinsey to finalise the investment strategy and focus, said the people cited. The platform will look at the broad spectrum of green financing, of which renewables is only a part. As per McKinsey’s calculations, efforts to finance energy transition toward greener and cleaner options in the country face an annual deficit of $100-125 billion.
For TPG, green financing will cover the entire gamut ranging from renewable power producers or their supply chains, to helping them with project finance, working capital, even at the construction stage. It also plans to cover the renewable energy vendor ecosystem as well as the recycling industry as part of electric vehicle (EV) fleet management besides transition finance for industrial decarbonisation in core sectors.
